Why ESG and impact reporting matters for winning a vendor contract? What are the first steps to prepare for the Nordics’ quest for sustainability?
By Iskra Yovkova – Co-founder & Managing Director of uIMPACT.
The global shift towards sustainability is reshaping the landscape for businesses and the Nordic countries are leading the charge. Denmark, Sweden, Norway, Finland, and Iceland are leaders in environmental and social aspects, renewable energy usage and carbon reduction ambitions. This was further strengthened in 2019, when the Nordic prime ministers adopted Our Vision 2030, pledging to become the most sustainable and integrated region in the world by 2030.
Companies in the Nordic region know that considering Environmental Social and Governance factors and risks can help them become more resilient, make more money, retain customers, and make their employees feel good about where they work. They also know that investors are paying attention, and lacking awareness of ESG factors could hurt their reputation and profits. Since two-thirds of the average company’s ESG footprint lies with its suppliers, Nordic companies are not focusing only in-house, but also looking at how their partners and suppliers are managing their impact and ESG aspects.
This is especially true for companies, subject to reporting under the Corporate Sustainability Reporting Directive (CSRD). The regulation mandates that larger corporations are obligated to provide detailed, standardized sustainability reports and the number of affected companies is expected to rise from 11 700 to 50 000.
In addition to the already complying public companies and financial institutions, another 2 000 privately-owned Nordic companies will need to report under the CSRD.
While primarily targeting large businesses, the trickle-down effect of CSRD has significant implications for smaller businesses. With the directive enforcing transparency, large companies will intensify their scrutiny of supply chains and will invariably demand similar standards from their counterparts. This means potential suppliers and subcontractors must be prepared to provide ESG data and insights, even if they're not directly bound by the regulation. Moreover, vendors that endanger companies’ carbon transition plans might be removed.
Moving beyond regulations, management of sustainability factors can be seen as a natural business decision. Companies became more aware of the risks associated with their supply chains, especially when witnessing disturbances like the COVID-19 pandemic, geopolitical tensions, and climate-related events. Analyses show that companies with resilient, ESG-aligned supply chains are more likely to recover faster from disruptions. As a result, businesses look at supplier clauses to act as risk mitigation tools, ensuring the sustainability and resilience of their supply chain.
All this translates into a clear message: meet ESG criteria or risk being left out of high-value contracts. Here is some high-level advice on steps to be taken:
Management support: support on Board level is needed, if necessary, educate management and gain support.
Allocate Resources: ensure that there are adequate resources, both in terms of finances and manpower. If you are a large company, appoint cross-departmental group, responsible for sustainability initiatives.
Perform assessment: Conduct a thorough assessment of the current business operations to identify materiality, risks, impacts, and opportunities. Know your areas for improvement.
Set targets and ambitions: Define and communicate clear, measurable sustainability goals.
Improve your policy standing: adopt comprehensive policies and processes across the environmental, social, and governance domains, and understand and manage your impact.
Implement sustainable practices: turn policies into actions.
Monitor and report: regularly monitor, measure, and disclose your sustainability efforts.
Engage stakeholders, incl. suppliers: engage with your suppliers and communicate your sustainability expectations. Encourage them to adopt sustainable practices. Engage employees, partners, and investors to gather feedback and make continuous improvements.
Stay updated: stay updated with the latest trends, regulations, and best practices in sustainability.
…and, most importantly, start today.
Sustainability is not just a passing trend; it's a paradigm shift that will shape the future of business. Aligning to sustainability principles will unlock access to talent and funding, mitigate risk, and boost resilience and will move you one step towards being sustainability clauses vendor-ready.
Interested in improving your vendor competitiveness by strengthening your ESG policy standing and demonstrating your impact? Let’s chat!